Core sector growth rises to 5 month high in Aug

Output of India's eight major industries expanded exponentially in August by 4.9 per cent from a rise of 2.6 per cent during the previous month, official data showed on Tuesday. The Index of Eight Core Industries (ECI), representing the output of major industrial sectors like coal, steel, cement and electricity, had risen by 3.1 per cent in the corresponding month of the previous year.

The ECI index carries 40.27 per cent weightage of the Index of Industrial Production (IIP) which is the macro-gauge for India's factory output. "The combined Index of Eight Core Industries stands at 123.6 in August, 2017, which was 4.9 per cent higher compared to the index of August, 2016," the Ministry of Commerce & Industry said in the summary of the ECI for August.

"Its cumulative growth during April to August, 2017-18, was 3 per cent."

On a sector-specific basis, refinery production, which has the highest weightage of 28.03 per cent, grew by 2.4 per cent in August 2017 as compared with the corresponding month of last year. Electricity generation, which has the second highest weightage of 19.85, rose

by 10.3 per cent. Steel production, the third most important component with weightage of 17.92, increased by 3 per cent during the month under review, while coal mining, with a 10.33 weightage, rose by 15.3 per cent in August 2017.

However, extraction of crude oil, which has an 8.98 weightage, slipped by 1.6 per cent during the month under consideration. On the other hand, the sub-index for natural gas output, with a weightage of 6.88, stood higher by 4.2 per cent.

Conversely, cement production, which has a weightage of 5.37, decreased by 1.3 per cent in August 2017. Similarly, fertiliser manufacturing, which has the least weightage -- of only 2.63 -- dipped by 0.7 per cent. Healthy growth in key sectors would have positive implications on the Index of Industrial Production (IIP) as these segments account for about 41 per cent to the total factory output.

Commenting on the data, rating agency ICRA said: "Given the favourable base effect and the expected rebuilding of inventories prior to the festive season, we expect the IIP (index of industrial production) growth to improve in August relative to the initial estimate of 1.2 per cent for July 2017".